Health-Care Issues States Should Watch in 2015

Going beyond the upcoming U.S. Supreme Court ruling on subsidies and looming reauthorization of the Children's Health Insurance Program.

A hepatitis C patient holds Sovaldi, which costs $1,000 per pill, or $84,000 for a 12-week treatment course. MCT/Bob Ecker

Much of the health-care conversations this year will concentrate on two issueswith major budgetary and insurance coverage implications that Governing has previously covered. Those are the upcoming U.S. Supreme Court decision that could end federal subsidies in the 30-some states that don’t operate their own exchange, making insurance unaffordable for many, and whether Congress reauthorizes the Children’s Health Insurance Program, which covers 8 million kids from low-income families through state and federal funding.

Unfortunately for states, those are also both issues over which they have little control. There are, however, several other areas to watch over which states do have greater control and still others worth keeping an eye on where federal policymakers remain in the driver’s seat.

In more than 23 states, primary care physicians and some specialists who treat low-income patients are starting the year with a pay cut of about 47 percent after the expiration of a two-year reimbursement increase under the Affordable Care Act. Given that the program typically pays doctors only about 60 percent of Medicarelevels, which is often below private insurance rates, and Medicaid enrollment is rising, it’s an open question whether doctors will stop taking new Medicaid patients.

Fifteen states reported in surveys that they intend to continue the pay increase using their own money. Twelve said they were undecided at the time, but many have since joined the 23 others in their refusal to extend the pay increase.

The impact on pay will vary dramatically, but in states such as New York and New Jersey -- where reimbursement rates are already among the lowest nationwide -- the cut will eclipse 50 percent or more of doctors' pay, according to the Urban Institute, a nonpartisan think tank.

Doctors commonly cite low payment as a crucial reason for not participating in Medicaid, but how much the pay bump boosted the number of Medicaid doctors remains unknown because of the program's delayed implementation and a lack of formal tracking. There’s also little research on how reimbursement levels affect participation.

Robert Wergin, president of the American Academy of Family Physicians and a doctor in rural Nebraska, said his group pushed for a two-year extension of the program along with formal study of its effects, but making the case without data already was a tough sell. The group conducted an informal survey of members last month and found most respondents said they won't take on new patients, in large part because it would require adding support staff and administration.

"They’re not going to cut the patients they’ve been taking on and just try to figure out a way to make it work with that kind of a cut, but it’s likely ... [that] ... if they have the option, they won’t be taking on new Medicaid patients," Wergin said.

Medicaid Expansion Waivers

By the Kaiser Family Foundation's count, 28 states have expanded Medicaid, and November’s elections largely closed off any more openings for Medicaid expansion. What little movement there will be in this area will come from conservative states that want greater privatization, patients to shoulder more of the cost and work requirements with insurance coverage. To do any of that, they will need special waivers. The question is where the federal government will draw a line.

States expected to continue or start negotiations in 2015 are Indiana, Tennessee, Utah and Wyoming. Indiana wants new patients at all income levels to contribute to health savings accounts to offset costs, to lose their comprehensive coverage for six months if they fail to contribute to their savings account, to participate in work referral or job training programs, and to pay $25 for non-emergency use of the ER.

Those requests make Indiana’s plan arguably the most conservative yet, and so far federal officials have refused to budge on previous work requirements, efforts to drop coverage for non-compliance and efforts to charge premiums for those earning below the federal poverty level, which is $11,670 for an individual household. Pennsylvania, for instance, sought similar provisions but either jettisoned them or toned them down before the federal government agreed to the state’s waiver request.

“I think the point is, so far, they haven’t turned anybody down,” said Joan Alker, a research professor at the Georgetown University Health Policy Institute who follows state waivers. “Having said that, there are some lines that they’re not going to cross. These are very complicated proposals. But I think from what we’ve seen so far is if a governor wants to get to ‘yes,’ they can.”

Still, the line might be blurrier than it's appeared so far. At the close of last year, the U.S. Department of Health and Human Services allowed Arkansas to require patients earning 50 percent of the poverty line or higher to contribute to health savings accounts, according to Modern Healthcare, which first reported the news.

Managed Care Regulations

With managed care expected to account for an ever-greater share of Medicaid enrollees, those private health insurers are also coming under greater scrutiny from federal officials.

States contract with private managed care organizations to run critical aspects of their Medicaid programs in exchange for a lump sum per member in hopes of controlling costs and improving care. By 2016, about three-quarters of all Medicaid patients will be enrolled with managed care plans, according to the consulting firm Avalere Health.

A pair of reports from the Health and Human Services Office of Inspector General last year criticized standards for patient access to doctor networks. The agency found, among other things, wide variation in state standards for distance to doctors, little in the way of monitoring violations, and inaccurate directories of providers participating in a plan. Those reports have included recommendations that the Centers for Medicare & Medicaid Services strengthen oversight of states, and the agency is expected to set more uniform access standards this year.

States can also expect additional rules for how they set rates with managed care organizations, which have come under fire in recent years from federal lawmakers who argue it’s difficult to know whether a state’s rates are too high or low.

High-Cost Specialty Drugs

When the hepatitis C drug Sovaldi received U.S. Food and Drug Administration (FDA) approval in late 2013, it quickly took state health officials by storm. Its cost -- at least $84,000 for several months -- and its cure rate -- 90 percent in some trials -- drew wide attention, billions in sales and Congressional inquiries on its price tag.

Because of its exorbitant cost and the fact that people suffering from hepatitis C disproportionately fall under Medicaid programs, most states enacted rules limiting the drug’s use to those with the most severe cases of hepatitis C and those who previously failed with other therapies. Pharmacy benefit managers have been looking for discounts through exclusive deals, with CVS most recently announcing an agreement with Sovaldi's maker, Gilead Sciences.

Global pharmaceutical spending is expected to increase 30 percent through 2018 to $335 billion, according to a recent report from IMS Institute for Healthcare Informatics, a private firm, and breakthrough specialty drugs will account for 40 percent of that growth. That means states will likely keep a close eye on FDA approvals that have the potential to deal major budgetary blows. It also means Medicaid directors will continue advocating for federal intervention -- such as price controls -- better federal matching rates for “curative” specialty drugs or greater waiver flexibility to allow states to push for better deals with drug manufacturers.

As the Trump administration lets states experiment with work requirements and other eligibility rules, the costs are adding up. Some policy experts worry they are "shifting spending from health care for needy families to administrative bureaucracy."